Hospitality/Beer Duty - January 2022

Dear Constituent,

Thank you for contacting me regarding support for our hospitality sector and other issues affecting the hospitality sector such as business rates, VAT and beer duty.

I know this is an issue of importance to a number of people and businesses right across the UK. I am pleased that the Government’s Hospitality Strategy focuses on reopening, recovery and resilience, including further support for businesses reopening, with an additional £5 billion worth of grants. Ministers will work with the Government-owned British Business Bank and its delivery partners to support access to finance. Following the uncertainty created by Omicron last month, I was pleased when the Chancellor announced a range of grants for the hospitality sector last month - COVID-19 economic support package - GOV.UK (www.gov.uk)

I also welcome that, following a review, the Government will reduce the burden of business rates in England by over £7 billion over the next five years, and make the system fairer, more responsive and more supportive of investment. Up to 400,000 retail, hospitality and leisure properties will be eligible for a new, temporary £1.7 billion of business rates relief next year. This will provide support until the next revaluation, helping the businesses that make UK high streets and town centres successful evolve and adapt to changing consumer demands. 

The temporary reduction in VAT to 5 per cent instead of 20 per cent for hospitality and tourism businesses, which was previously been extended until 31 March 2021 and subsequently place until 30 September 2021 is changing to 12.5 per cent and will remain so until 31 March 2022. The scope of the relief will remain unchanged over this period.

I welcomed the Chancellor’s announcement that businesses will be able to spread their deferred VAT repayments over 11 smaller, interest-free repayments. This will benefit almost half a million businesses who have deferred £30 billion worth of VAT this year.

This vision comes on top of the continued support for businesses through the Government’s unprecedented £352 billion package of economic support. I am confident that this Strategy, alongside the Government’s High Streets Strategy and its Tourism Recovery Plan, will play a key role in supporting the hospitality sector..

In relation to beer duty, prior to the last Budget, which has been raised with me by a number of constituents, I wrote to the Chancellor last year to seek measures to support the hospitality sector – Richard writes to the Chancellor calling for a cut in beer duty to support pubs | Richard Fuller. For example, for many years, I have felt that the level of beer duty is too onerous for our pubs. This has created an unfair competitive advantage for alcohol sales through supermarkets and other retail outlets, with long term consequences for socialisation, a sense of community as well as potentially serious concerns for excessive drinking at home.

In tackling the spread of COVID, few sectors have been called on more for sacrifice than our hospitality venues and their supply chains. Many of these businesses are small and lack the resources to fall back upon for such an extended period of closure. Government schemes of support have, to be fair, been well beyond initial expectations, but we need the Chancellor now to look again at those who are being called on to bear the greatest economic burden.

I strongly support the reduction in beer duty - and not just as a temporary measure but as a permanent reduction.

The Autumn Budget 2021 confirmed that duty rates on beer, cider, wine and spirits will be frozen for another year, a move which will save consumers £3 billion over the next five years, and provide further support to the hospitality industry and its suppliers as they recover from the pandemic. Duty rates on draught beer and cider will be cut by 5 per cent, taking 3p off a pint and further supporting pubs.

I was glad to see the announcement in the Autumn Budget 2021 that, following a review, the alcohol duty regime is to undergo a major simplification. The old system was outdated system that set rates based on historical anomalies, and a new regime will be fairer to both consumers and producers, and promote product innovation in response to evolving consumer tastes.

This radical simplification of the duty system will reduce the number of main rates from 15 to 6, and tax products in proportion to their alcohol content.

All tax categories, such as beer and wine, will be moved to a standardised set of bands, with rates for products between 1.2-3.4 per cent alcohol by volume (ABV), 3.5-8.4 per cent ABV, 8.5-22 per cent ABV, and above 22 per cent ABV. Above 8.5 per cent ABV, all products across all categories will pay the same rate of duty if they have the same proportion of alcohol content. Registration and payment will also be simplified, and the practice where individual products have different administrative rules will end.

The new progressive manner in which alcohol is taxed will ensure higher strength products incur proportionately more duty, and these rates will be the same across all product categories. This change will address the problem of harmful high-strength products being sold too cheaply, and the new rates for low strength drinks below 3.5 per cent ABV will encourage manufacturers to develop new products at lower ABVs, giving consumers greater choice and greater options to drink responsibly.

I welcome the introduction of a new small producer relief which will build on the previous success of the Small Brewers Relief, which will benefit cidermakers and other producers of lower ABV drinks. This will allow small producers to diversify their product range to other products below 8.5 per cent ABV while still benefitting from reduced rates.

As set out above, I believe that there has been progress over the last year but I believe that there is more to do.

Finally, and specifically in relation to cider, the technical details have outlined how new small producer reliefs will be finalised through the alcohol duty review consultation process, and this will include and exploration of the merits of any changes to the minimum juice content through the alcohol duty review consultation. I recognise that the UK has a history of cidermaking dating back thousands of years, a tradition that has produced a variety of cidermaking traditions throughout the country. As you know, the present requirement under the Alcoholic Liquor Duties Act 1979 that 35 per cent of the finished product be made up by apple juice was last revised in 2010, following consultation with cidermakers. I am not aware of any plans to amend this provision in the 1979 Act.

Thank you for getting in contact.

Sincerely,

Richard Fuller